Service Tax

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Service tax was a tax levied by Central

Government of India on services
provided or agreed to be provided
excluding services covered under
negative list and considering the Place of
Provision of Services Rules, 2012 and
collected as per Point of Taxation Rules,
2011 from the person liable to pay
service tax. Person liable to pay service
tax is governed by Service Tax Rules,
1994 he may be service provider or
service receiver or any other person
made so liable. It is an indirect tax
wherein the service provider collects the
tax on services from service receiver and
pays the same to government of India.
Few services are presently exempt in
public interest via Mega Exemption
Notification 25/2012-ST as amended up
to date and few services are charged
service tax at abated rate as per
Notification No. 26/2012-ST as amended
up to date. Presently from 1 June 2016,
service tax rate has been increased to
consolidated rate at 14% +0.5%+0.5%=
15% of value of services provided or to
be provided. The service tax rate now is
consolidated rate as education cess and
secondary higher education cess are
subsumed with 2% of "Swach Bharat
Cess(0.50%)" has been notified by the
Government.

From 15 November 2015, the effective

rate of service tax plus Swachh Bharat
Cess, post introduction of Swachh Bharat
Cess, was 14.5%. Currently, Swachh
Bharat Cess and Krishi Kalyan Cess
would also be levied on all services on
which Service Tax is being levied and
therefore, the Service Tax (including
Swachh Bharat Cess and Krishi Kalyan
Cess) applicable from 1 June 2016 has
become 15%.
During the 2015 budget, the Finance
Minister had incremented the service tax
rate from 12.36% to 14%, which had been
applicable from June 1, 2015. Further,
from November 15th, 2015, an additional
Swachh Bharat Cess got added at the
rate of 0.5%, which left the service tax at
14.5%. After the new proposal brought in
during the 2016 Union Budget, the
applicable service tax from June 1, 2016
will be "15%"

History of Service Tax

Dr. Raja Chelliah Committee on tax
reforms recommended the introduction
of service tax. Service tax had been first
levied at a rate of five per cent flat from 1
July 1994 till 13 May 2003, at the rate of
eight percent flat w.e.f 1 plus an
education cess of 2% thereon w.e.f 10
September 2004 on the services
provided by service providers. The rate of
service tax was increased to 12% by
Finance Act, 2006 w.e.f 18.4.2006.
Finance Act, 2007 has imposed a new
secondary and higher education cess of
one percent on the service tax w.e.f
11.5.2007, increasing the total education
cess to three percent and a total levy of
12.36 percent. The revenue from the
service tax to the Government of India
have shown a steady rise since its
inception in 1994. The tax collections
have grown substantially since 1994–95
i.e. from ₹410 crore (US$60 million) in
1994–95 to ₹132,518 crore
(US$19 billion) in 2012–13. The total
number of Taxable services also
increased from 3 in 1994 to 119 in 2012.
However, from 1 July 2012 the concept
of taxation on services was changed
from a 'Selected service approach' to a
'Negative List regime'. This changed the
taxation system of services from tax on
some Selected services to tax being
levied on the every service other than
services mentioned in Negative list.[1]

Under the Service tax from the year of

original levying year of 1994 are
constantly growing. The collections are
shown as in the following table:

Financial Year Revenue Rupees(in crores) Number of services Number of Assessees

1993–1994 254 2 2568

1994–1995 407 3 3943

1995–1996 862 6 4866

1996–1997 1059 6 13982

1997–1998 1586 18 45991

1998–1999 1957 26 107479

1999–2000 2128 26 115495

2000–2001 2613 26 122326

2001–2002 3302 41 187577

2002–2003 4122 52 232048

2003–2004 7891 62 403856

2004–2005 14200 75 774988

2005–2006 23055 84 846155

2006–2007 37598 99 940641

2007–2008 51301 100 1073075

2008–2009 60941 106 1204570

2009–2010 58422 109 1307286

2010–2011 71016 117 1372274

2011–2012 97509 119 1535570

2012–2013 132518 Negative List Regime 1712617

Rates
Service Tax which started out at a
nominal 5% is now at 15%.

It was increased to 14% for transactions

that happened on or after 1 June 2015
and then for transactions that occurred
on or after 15 Nov 2015, the new Swachh
Bharat Cess at 0.5% was also added to
the Service Tax. Therefore, the effective
rate became 14.5% with effect from 15
Nov 2015.

For transactions that occurred on or after

1 June 2016 this tax is at 15%.[2] 2016
Union budget of India has proposed to
impose a cess, called the Krishi Kalyan
Cess, at 0.5% on all taxable services
effective from 1 June 2016. The current
service tax is at 15%.[3]

Krishi Kalyan Cess:-

With introduction of Krishi Kalyan Cess[4]

at 0.5% w.e.f June 1, 2016, effective rate
of Service tax would eventually go up to
15%, which was earlier increased to 14%
(with subsumation of Education Cess
and Secondary and Higher Education
Cess) from 12.36% w.e.f June 1, 2015
and Swachh Bharat Cess at 0.5% on
value of all taxable services imposed
w.e.f November 15, 2015. Krishi Kalyan
Cess, which was announced during the
2016–17 Budget, has become applicable
from 1 June. A tax of 0.5% would be
levied over and above the Service Tax
and Swachh Bharat Cess. Till 31 May
2016, the Service Tax rate was 14.5%.
With Krishi Kalyan cess, the service tax
would increase to 15%. While Swachh
Bharat Cess was levied to conduct
cleanliness drive in India, the new cess
has been levied for the purpose of
financing and promoting initiatives to
improve agricultural growth.

History of Service Tax Rates in India

01/07/1994 – 13/05/2003 – 5%
14/05/2003 – 09/09/2004 – 8%
10/09/2004 – 17/04/2006 – 10.20%
18/04/2006 – 10/05/2007 – 12.24%
11/05/2007 – 23/02/2009 – 12.36%
24/02/2009 – 31/03/2012 – 10.30%
01/04/2012 – 31/05/2015 - 12.36%
01/06/2015 – 14/11/2015 – 14%
15/11/2015 – 31/05/2016 – 14.5% [14%
Service Tax + 0.50% Swach Bharath
Cess] 01/06/2016 – 30/06/2017 – 15%
[14% Service Tax + 0.50% Swach Bharath
Cess + 0.50% Krishi Kalyan Cess]

Small Scale Exemption

Service tax is only liable to be paid in
case the total value

of the service provided during the

financial year is more than ₹10 lakh
(US$15,000). If the value of services
provided during a preceding[5] financial
year is less than ₹10 lakh (US$15,000),
only then this exemption is applicable in
the current financial year. it is optional for
he wants to avail this exemption or not.[6]

Declared Services [7][8]

In the year of 2012, service tax laws has
witnessed a paradigm shift when the
taxation shifts from positive list of
services to negative list of services. At
that time, another concept of declared
service was introduced by the
Government of India via Section 66E of
Finance Act, 1994.

Declared service is the deeming fiction of

law. It provides the lawmakers with an
arbitrary power to declare any activity as
a service. Section 65B(22) defines the
declared service as any activity carried
out by a person for another person for
consideration and declared as such
under section 66E. Further, the definition
of service under section 65B(44) also
specifically covers the declared service
under the definition of service.

This section is also one of the vital

sections of Finance Act, 1994. Any
service included under this section will
be liable to service tax straight.

Negative list
Budget 2012 revamped the taxation
provisions for services by introducing a
new system of taxation of services in
India. In the new system all services,
except those specified in the negative
list, are subject to taxation. Earlier the
levy of service tax was based on positive
list—specified 119 taxable services.[9]

As per clause (34) of section 65B of the

Finance Act, 1994, the term "Negative
List" means the services which are listed
in section 66D. [10] 66D;government
service

Registration of Service
Tax[11]
As per Service Tax Law it is mandatory
for the following categories of persons to
obtain registration :-

Every person liable to pay service tax

under Reverse Charge
An input service distributor
Every provider of taxable service
whose aggregate value of taxable
service exceeds 9 lakhs in a financial
year.

Every person mentioned above will have

to get themselves registered under the
service tax law within 30 days from the
date of commencement of such service
or business.
Whereas in case of service provider
whose aggregate value of taxable service
not exceeded 9 lakhs in a financial year
not need to obtain registration, where in
case he has obtained registration he is
liable to payment of service tax only if
the value of taxable services exceeds 10
lakhs rupees.[2]

Service Tax Invoices

Rule 4A prescribes that taxable services
shall be provided and input credit shall be
distributed only on the basis of a bill,
invoice or challan. Such bill, invoice or
challan will also include documents used
by service providers of banking services
(such as pay-in-slip, debit credit advice
etc.) and consignment note issued by
goods transport agencies. Rule 4B
provides for issuance of a consignment
note to a customer by the service
provider in respect of goods transport
booking services.[12]

References
1. (PDF)
https://web.archive.org/web/2014020212
2301/http://www.servicetax.gov.in/ovw/ov
w4_analysis-st-rev-ason120913.pdf .
Archived from the original (PDF) on 2
February 2014. Retrieved 26 January
2014. Missing or empty |title= (help)
2.
http://www.cbec.gov.in/resources//htdocs
-cbec/press-release/faq-sbc.pdf
3. "Budget 2016: Service tax proposed to
be increased from 14.5% to 15%" , The
Economic Times, 29 February 2016
4. "Krishi Kalyan Cess" .
5. "No Service Tax Up to 10 Lakhs Value of
Services Rendered- Small Service
Providers Scheme" . The Tax Info.
Retrieved 2016-06-11.
6. Karan Batra. "All about Service Tax &
new Service Tax Rate @ 14.5%" .
Chartered Club.
7. "Service tax registration - Import export
code" . hubco.in. Retrieved 2016-06-12.
8. Commissionerate of Service Tax,
Kolkata[1]
9. "Service Tax Procedures" . Central
Board of Excise and Customs, Department
of Revenue, Ministry of Finance,
Government of India.
10.
https://web.archive.org/web/2013070311
4544/http://www.aubsp.com/2013/06/ser
vices-tax-negative-list-66d.html . Archived
from the original on 3 July 2013.
Retrieved 24 June 2013. Missing or empty
|title= (help)
11. "Introduction to Service Tax in India -
My Guest Post" . My Guest Post. Retrieved
2017-04-12.
12. "INVOICE FOR SERVICE TAX" .
TopCAfirms. Retrieved 4 December 2013.

External links
Automation of Central Excise and
Service Tax Portal

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